TOBACCO WARS – WHO IS TO BLAME

TOBACCO WARS – WHO IS TO BLAME

Pic Herald Sun

No matter how much they duck and weave and ignore the problem, there is only one entity to blame for the Tobacco Wars: the Government.

The tobacco black market has grown due to the increase in excise and other taxes on tobacco products, taking the price of a pack of cigarettes from $10 for the popular Winfield Blues in 2005 to around $47 a packet and $469 per carton by 2023.

A carton of cigarettes will last most smokers a bit over a week if they are lucky.

And with the annual excise locked in at 12% per annum, a carton of cigarettes will be over $500 per carton in 2024.

Smoking may be socially unacceptable, and a smoking environment is not too pleasant for non-smokers. Still, it is not criminal, and in these economic times, smokers are forced to access their smokes on the black market for purely financial reasons exacerbated by the current cost of living.

This strategy by the Government to tax people out of using tobacco has forced otherwise law-abiding citizens into fringe criminality, and who knows once the smokers become entwined in the criminal sphere what that will lead to.

Whatever that is, you can guarantee the criminals will exploit it.

Domination of this market will reap billions of dollars for the criminal gangs. Therefore, the motivation to control the market is enormous, hence the firebombings.

Black market cigarettes sell for around $20 per pack and are illegally imported into Australia by the container load.

The profit on just one container load is about $13 million.

The Herald Sun set out the case that describes this illicit trade from an unidentified source on April 3, 2024.

Tobacco industry analysis puts the ultimate retail value of a 40-foot container of smoke products at between $7m and $13m, more than double the worth of eight years ago.

The same load of contraband can be bought overseas for about $250,000, meaning there is potential for a 50-fold return on investment.

This has generated fierce competition for a lucrative market with other advantages for the tobacco racketeers.

Disposal of the product is far easier than for big shipments of narcotics like cocaine and methylamphetamine, where buyers are at risk of long prison terms.

“It’s always easier to get people to buy tobacco,” the source said.

Given these figures, is there any wonder that organised crime would move in on this lucrative cash cow?

And the cow that gives keeps on giving, as the subsequent rise annually in excise is set at 12%, pushing the retail value of an illegal container load to $14.5 Million and a pack of cigarettes close to $80, driving more smokers to the black market.

The extraordinary profits from this illegal trade have driven organised gangs to try to dominate this lucrative market. When they do, and without competition, they will push the price of the illicit products.

Given smokers are now prepared to pay $70-$80 per packet for legal cigarettes, the illicit cost, without competition, will also rise so the black-market smokes could reach $50-$60 per packet, raising the profits for the criminal gangs to numbers with a ‘B’ in front, the equivalent of the National debt.

The government has already had to adjust the Budget figures to reflect the reality of the loss of projected excise, but it seems caught in the ‘headlights’ of what to do about it.

The answer is pretty simple: it is in the numbers.

The massive cost of attempting to stop the importation at the border and the vast cost of policing the fallout of lawlessness and the growth of criminal gangs could be slashed tomorrow if the excise was removed without fanfare and pre-warning to the criminals.

The efforts to stop this issue at the border have failed, and simply increasing the resources there would be a ‘fool’s folly.’ A reinvigorated ‘Quit’ campaign could be aimed at the ‘Black Market’ that will ultimately lead to higher tax revenues once the hiatus designed to destroy the illegal trade, is completed.

An inquiry that may take a year or more could recommend a sustainable tax regime without restarting the illicit trade. This would encourage smokers to return to lawful retailers and give the government the financial boost they crave from taxation.

Catching criminals with vast stocks of illicit products would be somewhat prophetic, as it would hit them where they feel the most pain: in their hip pocket.

They will be forced to lower their prices to a degree where it is uneconomical to continue to import illegal tobacco products.

If the wars continue unabated and given the ethos (greed) of criminal gangs, the problem will escalate, and then the chances of somebody being killed would nearly be inevitable.

WHAT DO FIREBOMBED TOBACCO STORES AND ILLICIT DRUGS HAVE IN COMMON?

WHAT DO FIREBOMBED TOBACCO STORES AND ILLICIT DRUGS HAVE IN COMMON?

They both make criminals very, very rich and make the Government look very, very silly as they continually fail to implement the tried-and-true strategies that will bring about solutions.

Both issues are intrinsically linked, and one of them could be resolved overnight, greatly affecting the operations of the other.

Removing or greatly reducing the excise on cigarettes/tobacco would seriously damage the criminal elements and destroy their marketing model, plus save many millions of dollars on enforcement.

The Government is not learning from its mistakes as it now moves to curtail and legislate against vaping, which will potentially create another opportunity for criminals to expand their black-market activities, this time predominantly with children, and that is incredibly dangerous. Associating children with the criminal element will inevitably lead to increased crime by children.

Crime entraps our young people, attracted by the lure of wealth, notoriety and excitement, ruining many of their lives and the lives of their families, who are the silent victims.

Additionally, the problem breeds and encourages criminal activity as the addicted and the desperate, some of whom were recruited as children, are forced to commit crimes to fund their addiction.

Although Tobacco and Vapes are still legal, where illicit drugs are not, the CAA is not proposing a prohibition on those products as with illegal drugs for several very good reasons. Smoking tobacco and Vaping affects individuals but does not generally affect others.  Illicit drugs potentially affect everyone.

A classic example is the road toll, where evidence shows many drivers involved in collisions, including fatalities, are drug-affected.  Violent and anti-social behaviour of those affected by illicit drugs is also very common.

However, there are similarities in how the black markets, which run in parallel, should be handled.

The tried and successful strategies we refer to are the Quit campaign and the Sun Smart, Slip Slop and Slap, which are outstanding examples of the power of marketing that achieved exceptional success in reducing smoking and sun exposure in the community.

It is a pity, bordering on wanton incompetence, that the same weapon has not been used in the Clayton’s Drug War. Because of its potential to succeed, and it is somewhat bothersome that this strategy is avoided, perhaps indicating that dark forces or corruption are at play.

Both initiatives succeeded because the Quit campaign used marketing to target the demand side in marketing parlance. Whether your house, car, or workplace became a smoke-free zone, the impact on the tobacco demand plummeted.

The Sun Smart campaign focused on changing public opinion to change social norms and the bronze Aussie persona. It successfully targeted parents and children to reach a high degree of compliance with the concept.

The Quit campaign worked remarkably well until the government dramatically raised taxes to make cigarettes unaffordable. This spawned the chop-chop tobacco market first, followed by packaged cigarettes smuggled in by the container load.

Criminals’ ability to afford to enter into supply contracts by the container load indicates the enterprise’s profitability. As the gulf grew between the cost of legally purchased tobacco products and what the black market could supply tobacco products for, the back market flourished.

The intent to make tobacco products too expensive and reduce tobacco usage, as a result, has dramatically backfired.

The government flipped the successful targeting of the demand to try and rely on law enforcement tackling the supply side as the solution. That strategy has failed through no fault of the Police but a failed government approach.

Rather than realising what they had done, they continued to raise taxes on tobacco, aggravating the situation by increasing criminals’ profits.

As the gap between what the Cartels can sell illegal tobacco products for and what their retail price is widens, the black-market price can increase, and that is pure profit for the criminals.

Marketing, in its simplest iteration, is all about supply and demand. If there is no demand, the supply side quivers as profits drop, but if the market is solid, there will always be a supply side to service that demand, precisely what has happened with drugs and tobacco.

The black-market enterprise is so lucrative that they are prepared to risk serious jail time by firebombing Tobacco stores to gain market control.

Gangs involved in the illicit drug trade have expanded to include the illegal Tobacco trade because the profits are more significant and the penalties, if caught, are likely to be much less.

The drug market’s primary customer base is drug addicts, and the high rate of dealers needed to distribute the drugs to support their habit, is akin to a pyramid scheme. Most participants support their habit by being a dealer selling the product, but that absorbs a significant share of the profits and becomes less attractive as gang leaders who find their income adversely impacted.

But the criminal elements had no need to fear as the government came to the rescue and provided them with a better alternative with more profit: Tobacco: a golden goose for when your market strategy is not as profitable.

If the government had targeted the demand side and relied on marketing instead of tax income from tobacco, it would not be in its current predicament.

Illicit Drugs are very similar; the government wants to assist addicts to be better addicts; this is a non-strategy to reduce the shocking impact drugs have on our society.

In this area, the government has, in part, been conned.

Drug apologists have convinced the government that the best strategy is Harm Minimization; however, they have manipulated that concept as part of a strategy to achieve acceptance of illicit drugs as the community norm.

How any government can fall for the trick of providing an Injecting Room, which has been empirically determined to be a failure, is beyond comprehension.

The Government has been diverted from the real solution, the four pillars of Prevention, Enforcement, Treatment, and Rehabilitation (PETR). Facilitating drug use in an injecting room as a stand-alone response without the other pillars is a recipe for the disaster we are experiencing.

One Pillar will not stand up without the others supporting it, and it is time for the government to take a more realistic approach to addressing these problems, using PETR principles as the basis.

To date, this government has tried to rely on law enforcement to solve the issue, but plainly, that is not working despite the best efforts of Police and Border security measures.

It is a problem that cannot be resolved by enforcement alone.

Obversely, to assumed norms, the best thing the Government can do in the short term is to drop the tax applied to tobacco products significantly. That will not considerably cause a rise in the number of smokers. But those who do smoke will likely return to legitimate retailers (increasing Tax revenue) and cause a significant blow to the illicit traders, who overwhelmingly are also illegal dealers of drugs.

Addressing these issues properly will have a profound beneficial impact on all Victorians.